Have you ever looked at an old photograph from pre-1970 and noticed just how much thinner people were back then? It is widely known that the USA and the world are seeing a huge increase in obesity and chronic disease. And along with this increase in the rates of obesity and chronic disease come increased numbers of people who will need Long Term Care at some point in their life.
While dedicated Long Term Care insurance is available, I am a much greater fan of newer Hybrid Life Insurance policies and Life Insurance policies with Accelerated Living Benefits. Both of these types of policies combine the Death Benefit you expect with LIVING BENEFITS that you can use while you are still alive. These policies are game changers.
Hybrid Life/Long Term Care
A Hybrid Life Insurance/Long Term Care policy is an asset-based alternative to traditional Long Term Care Insurance. With Long Term Care coverage built into a Permanent Life Insurance policy, you can shift your retirement assets to meet your new requirements. Your “old” policy can be exchanged tax-free for a “new” policy that provides much more value. The Long Term Care benefit is usually a multiple of the Death Benefit.
[Learn More: Life Insurance 101]
Traditional Long Term Care Insurance is like Term Life Insurance. Its a use-it-or-lose-it proposition. Hybrid Life/Long Term Care policies, on the other hand, offer a Win-Can’t Lose proposition. There is no downside…
- If you need Long Term Care, you will utilize the benefits of the policy, or
- If you never need Long Term Care, the Death Benefit passes to your heirs, or
- You can access the cash value in an emergency
Accelerated Living Benefits Riders
Accelerated Living Benefits Riders are policy riders that allow for a portion of the Death Benefit to be paid out in the event the Insured suffers specifically named conditions as described in more detail below:
Critical Illness Rider
A critical illness rider is triggered when the insured suffers a specifically named disease or condition. Some examples of what may be covered include:
- Heart attack
- Cystic Fibrosis
- End Stage Renal Failure
- Major Organ Transplant
- ALS (Lou Gehrig’s Disease)
- Aorta Graft Surgery
- Aplastic Anemia
- Heart Valve Replacement
- Motor Neuron Disease
If you are interested in receiving a quote for a policy with Accelerated Living Benefits, Click Here to request a quote.
Chronic Illness Rider
A Chronic Illness Rider is triggered when a doctor certifies that the insured cannot perform two out of the six “Activities of Daily Living”. This is the same trigger as for most dedicated Long Term Care policies. Activities of Daily Living include:
Terminal Illness Rider
A Terminal Illness Rider is triggered when the insured is diagnosed with a terminal illness that will result in death within 24 months.
Long Term Care as Part of a Solid Financial Plan
Whether you solve your LTC needs with a dedicated LTC policy or with one of the Life Insurance solutions mentioned above, LTC is a vital part of any Retirement Plan. Investing for retirement is the easy part. We just need to accumulate sufficient assets to generate the income we will need when we retire. We can plan for what we know will happen. I can even somewhat understand people stating that they are going to “self-insure” or “buy term and invest the difference” when it comes to buying permanent life insurance. We need the insurance when we are younger to ensure we take care of those who are dependent upon us.
[Read More: Buy Term and Invest the Difference: Myth Busted]
[Read More: Self Funding Long Term Care]
We buy insurance to cover the uncertainties in life. And its important to understand that the average person will never likely never accumulate sufficient savings to be able to self-insure against catastrophic healthcare risks. That is why we buy health insurance… as a backstop on expenses.
[Read more: Healthcare costs cause 75% Bankruptcies]
Long Term Care Insurance is much the same. Not everyone is going to need it, but it could be very expensive if we do need it. And Medicare will likely not cover it.
You should be aware that there is a tremendous financial risk if you DON’T have Long Term Care Insurance. The 2019 Genworth Cost of Care Survey found that the National Average monthly cost of an Assisted Care Living Facility is $4,051 in 2019. That cost is expected to rise to $7,317 by 2039. The same study found that the National Average cost of a private room in a Nursing Home was $8,517 per month. That cost is expected to be $15,383 per month by 2019.
Are you willing to take this bet with your life savings?
You need to ask yourself this: Can your retirement savings support the income you desire in retirement AND the additional costs that you may incure if you or your spouse require an assisted living facility?
A Hybrid Life Insurance/Long Term Care policy is an asset-based alternative to traditional Long Term Care Insurance. Existing Annuities or Permanent Life Insurance can be exchanged tax-free for a “new” policy that provides much more value. And in the case of annuities, its a way to convert a taxable asset into tax-free income if the benefit is used for Long Term Care.
The 4%-Rule is 4% for a reason. Income rates higher than 4% mean that you run the risk of running out of money before you die.
Whether you purchase Long Term Care Insurance or a hybrid life insurance-based alternative, take action to Safeguard Your Nest Egg
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No Rendering of Advice: The financial content in this document is provided for your personal education. It is not intended for trading purposes, and cannot substitute for professional financial advice. Always seek the advice of a competent financial advisor with any questions you may have regarding a financial matter. Information in this document is not appropriate for the purposes of making a decision to carry out a transaction or trade nor does it provide any form of advice (investment, tax, or legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments, or products.
The sole purpose of life insurance is for the death benefit protection. Any other benefit is ancillary.